April 14

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The Case for Tezos

"My baker just sent me some #XTZ"

Do you know what this means? If not, listen to this podcast: "The Case for Tezos"

In this freshly "baked" episode of Unforkable Podcast, I speak with Adrian Brink, the founder of Cryptium Labs about Tezos.

From what is Tezos, through how the network security works through Liquid Proof-of-Stake (and how it's different from Proof-of-Work), to other novel features that make the protocol special, such as on-chain binding governance and much more.

Transcript

Jonas: This episode is sponsored by FUD. F U D stands for fear, uncertainty and doubts. The word is often used in the cryptosphere for bits of information that are either negative, have a dubious source or are simply false. But just like the term fake news, "Fud" is often used to delegitimize, all kinds of information that do not go along with someone's worldview or particular bias.

I'm looking at you Maximalists. However, don't you think we should all embrace the uncertainty and doubts? Use them as a driver to gain more knowledge, to have a more balanced worldview? The next time you see something and think, Oh, that's just "FUD", don't just ignore it. Dig a little bit deeper and maybe you learn a thing or two ."FUD" give it a chance.

Welcome to Unforkable  the podcast that aims to make crypto more fun, engaging, and accessible for everyone. My name is Jonas, I'm the host of this show. Let's hit it. Coins, coins, coins,  blockchain coins coins coins, blockchain, Bitcoin, Bitcoin Ether, Ether Ethereum, Tezos. 

My Baker just sent me some XTZ. What are you picturing in your mind when you hear that phrase?

If you imagined a dodgy, cronut selling bakery run by a 20 something year old raver who also sells party drugs on the side. I wouldn't blame you, but you couldn't be more wrong. XTZ also called Tezzies, is the native cryptocurrency of Tezos, the blockchain and bakers, well, in Tezos lingo, a baker is running the nodes on the Tezos blockchain. A bakery is basically the equivalent of a miner in Bitcoin. So in this episode you hear for someone who runs one of the biggest bakeries on the Tezos blockchain. 

Adrian Brink: Are we recording? 

Yeah, we're 

Jonas: recording today. I'm talking to Adrian Brink. He's from Germany, but now here in Switzerland in Souk, the heart of the crypto Valley, and you're laughing at me. I'm laughing a little bit too. Cause uh, 

Adrian Brink: you know, actually 

Jonas: what is crypto Valley actually? does it really exist?

Adrian Brink: Oh no. They're like salt people here really like maybe 20. There are like 20 competent people here and the 500 to 600 lawyers and accountants. To be fair this is the Zug model and Zug has worked long before crypto existed and will survive crypto long after. I have no worries about this really. um, no but I actually moved here a couple of years ago. So when everyone in the world was like, yeah, the world is going to shit let's move to crypto Valley. Let's bunker down in Switzerland. I was like, yeah. Switzerland sounds cool. This is like a nice quiet place and I want to get away from big city. so I moved to Zug. 

Jonas: But Zug is not only nice and quiet, but also offers a favorable regulatory environment for crypto companies. Therefore it is no accident that many of them are based in Zug. For instance, the Tezos foundation, the blockchain we're talking about in this episode is based there as well.

In 2018, Adrian co-founded his company called Cryptorium Labs. He and his team of 11 are working, researching and running nodes on new kinds of blockchains, such as Tezos, that need far less electricity than for instance Bitcoin.

Let's say your nodes that you're running. Um, how, if, if there would be in the size and the importance of the network on Bitcoin, how would that look like this place where this mining operation would be running?

How would that be like in size or, um, how would you describe that? How much energy would that use?

Adrian Brink: A room, right? Like. It's like a single server  rack or like a room with a couple of sever racks, maybe a room five by five meters. 

Jonas: If it would will be on Bitcoin. 

Adrian Brink: Oh, on Bitcoin? 

Jonas: If the one you're running would be on Bitcoin, what would that be?

Adrian Brink: So on Tezos, we maybe have 4% of the network voting power right now. If you map this Bitcoin, that's a lot of Asics and a lot of power requirements. So like 4% of Denmark, I think in terms of power requirements roughly. 

Jonas: I checked and of the date of this recording, Bitcoin requires roughly the same amount of energy as the country of Pakistan. If Adrian would run his bakery on the Bitcoin network, he would need an industrial sized set up picture, multiple data centers filled with specialized and very energy hungry mining computers called Asics. Naturally. I was wondering what the bill of his bakery was on Tezos. 

Adrian Brink: It's not actually worth considering.

Maybe a hundred bucks a year or something. 

Jonas: Okay. Wow. And how, how does it look like, like literally you just said.. 

Adrian Brink: Yeah it's literally like a room five by five in a data center, somewhere in Switzerland 

Jonas: In the alps. In the alps is that true?

Adrian Brink: Jep. But funny anecdote about this. At some point randomly, I got an email from our data center provider saying like, don't worry guys, if in two weeks there will be tanks and soldiers outside checking when you go in.  I was like, wait, why? And it turns out that our data center is part of the Swiss critical internet infrastructure. So once a year, the Swiss military practices defending the data center because we share it with a ton of the Swiss banks. So if the data center goes down, um, much of sort of the, the German speaking banking system goes down in Switzerland.

Uh, which is cool. Um, so now we can confidently say that the Swiss military may not be maintaining our nodes. But in the worst case, it will be trying to defend them. That was a cool  experience,

Jonas: Whatever that is worth though. 

Adrian Brink: We'll see. 

Jonas: We'll hopefully we want see. But the reason why Adrian can fit his complete server infrastructure into a small room, somewhere in the Swiss Alps, instead of a factory sized warehouse has to do with the way how Tezos decides who is allowed to add new blocks to the Tezos blockchain.

Adrian Brink: Proof of stake is about determining who's allowed to participate  in creating new blocks in assembling transactions, into blocks on the network. The people with the most money, have the most voting power in the network. The same way that, the people were the most,  the most hash rate in Bitcoin. 

Jonas: What you need to know is when you are a Bitcoin miner, you get rewarded with newly minted coins. When you are allowed to add a block to the chain. Miners are therefore competing with each other by solving very hard mathematical puzzles. The more ASICs you have, the higher is a chance to add the next block and then get paid freshly minted Bitcoins. This mechanism is called proof of work. In Tezos they use a totally different approach called proof of stake.

With proof of stake the players who have more coins, have more power. The game theoretical idea behind this concept is, that someone who owns a lot of coins has no incentive to do something that could harm the Tezos blockchain, and therefore make their coins less valuable. 

Adrian Brink: Anyone in the world can run a node and validate the chain, but you need to have in Tezos at least 8,000 XTZ, one role in order to run one of the baking nodes. 

Jonas: So if you have 8,000 XTZ, you can start baking on Tezos, but attention Tezos works with reward and punishment. The coins of use for staking can automatically be destroyed, if you behave maliciously, 

Adrian Brink: The question becomes, how do you incentivize people, proof of stake validators to build a coherent chain instead of building on every single chain they possibly see on the network.

Well, what you do is, you say, if you sign a block, if you sign a block height two, but you sign two conflicting blocks at the same height, then we slash you. In Tezos this means you stashed security deposits and other systems. It's a percentage slash of how much fun you have at stake. Um, it results in the same thing though.

It results in the fact that there's now an economic penalty to signing all possible forks. And this is sort of how proof of stake incentivizes people. So, um, what you can do wrong is you sign two blocks at the same height, but different blocks. 

Jonas: I mean the software does this basically automatically. So if you don't do anything purposefully wrong, could it happen that they take away your coins? 

Adrian Brink: Without malicious intent?

Jonas: Yeah 

Adrian Brink: Most slashing events happened due to carelessness rather than malicious intent. When we started this in sort of end of 2017, a bunch of people started going around and saying, well, you need high availability. You need to have like duplicate your signing keys across multiple geographical jurisdictions. If one node goes down, then the other one automatically starts picking up. This is how people got slashed all the time.

So people came from this website mentality where like, yeah, I want to be available. And so they build infrastructure that is highly available, but not necessarily reliable. I really care that I never ever sign two blocks at the same height because there's sort of a hundred thousand dollar loss immediately.

A bunch of people started setting these up and they got convinced that they should be running a redundant infrastructure. So they copied their key, put it on two machines and then wrote a fancy Python script, um, to determine whether you were still live, whether the first network was still online. And if it wasn't, started spawning, the second node, then there was a bug in the Python script, then both nodes started spawning at the same time. And now they got slashed, because they double signed at the same height.

To this day still makes no sense to me why people care about availability. Like, I'm super happy to be down for two weeks, if it prevents me to being slashed once, because being down for two weeks is way cheaper than being slashed even once.

How could you compare the price of being down, two weeks? 

Like being down for a day, maybe a thousand dollars. I'm getting slashed once, maybe a hundred thousand dollars. I can be down in 100 days. And I'm still winning. 

Jonas: Wow. Okay. Wow. 

Adrian Brink: Like double signing is severely punished, for good reasons because it fundamentally affects the security of these networks.

Jonas: What could go wrong if you do a double signing? 

Adrian Brink: So if you don't punish this very severely, if you have a lot of voting power genuine more than one third of the network, you can start tricking light clients into believing - um, so like nodes that don't necessarily validate the entire blocks -  into following the wrong chain.

So you can start double spending exchanges, for example. Um, and if you have more than two thirds, you can just do arbitrary things. Like you can create a hundred different forks and no one will be able to tell what is the real fork or at least some programmatic Intel. Um, and so improve work, you don't have this problem.

And so due to that, it's severely punished in proof of stake.

Jonas: But Tezos also has some other interesting characteristics and features. For instance, if you can't run your own bakery and participate directly in the network, because you don't want to, or you don't have 8,000 XTZ, you can delegate your coins and also voting power to a bakery of your choice.

The Baker in turn has even more power in the network and we'll share the newly minted XTZ coins with the delegator. 

I also use have some Tezos, not many. Um, But if I want to, well, now the delegation comes into play. I go to guys like you or other nodes, and I say, Hey, take my coins, vote for me and kind of use my capital, 

Adrian Brink: let's say....

The best part is you don't even have to talk to us. And because you can just send a transaction on the network. Yeah. And now you're one role you 8,000 XTZ it's just pointed at us. And, um, it's completely permissionless system. 

Jonas: They don't even leave my wallet basically. 

Adrian Brink: No you have full custody of your assets

Jonas: There's literally no risk to do that.

Adrian Brink: Yeah.

Jonas: I can also earn some.. I wouldn't say  interest on it or how would you, how would you say that? If I delegate? 

Adrian Brink: It's not interest. 

Jonas: It's not interest, okay, what is it?

Adrian Brink: Fundamentally it's inflation. This is the weirdest thing also from tax perspective. And I don't think governments have yet understood this. If a hundred percent of XTZ is staked, no one makes any money. It just, we just print 5% more tokens every year. And yet we somehow believe that we made money even though no, we just diluted everyone equally. And it makes no sense to me that this is like a taxable event that you've received for inflation. 

Jonas: One of the biggest challenges with decentralized systems, is that it is really hard to make changes or upgrades.

Let's say when your computer, for instance, we'll get an OS upgrade, then it's usually a central entity, like a corporation that will decide that you need to update the software on your phone or computer and what new features will be implemented in this update.

For blockchains and decentralized systems in general, this process is much more complicated. Many blockchains have no formalized way of doing things, which can cause a lot of problems. Tezos addresses this issue with a set of formalized rules that work similar to a modern democracy, where everyone who holds XTZ has a vote.

Adrian Brink: How much has the Ethereum evolved since its inception three years ago?

Not a lot, really, nothing has happened in three years ,effectively. 

Jonas: Really?

Adrian Brink: They've added like two or three OP codes. It's minimal. um, like..

Jonas: What are they doing? All these teams? 

Adrian Brink: It's an interesting question. I don't know. Um, but like the core protocol in Ethereum or Bitcoin for that matter, hasn't changed all that much.

Um, fundamentally, because they have no way to agree, upon whether the community wants something. Then there's always this fuzzy notion. What is the community? What is, who, who are the stakeholders? Who's a right to have input, and then it ends up if you don't have governance system ends up in flame wars and who's loudest on Twitter.

Who's loud on Reddit who consents of whom in other platforms. It's a mess. Due to that, mostly they haven't evolved, um, 

Jonas: basically infighting what code should be added to the, to the protocol?

Adrian Brink: No but 

Jonas: also people have 

Adrian Brink: very different opinions and just because you're very loud on Twitter, like being loud on Twitter, doesn't imply that you're either technically capable or that you have a lot of stake in the system. It may also imply that you are just unemployed. Like either one, like either you have like a lot of stake in the system and that's why you care or you're unemployed. Both the totally valid things. And you have no way to tell by who's on Twitter. 

Jonas: Or, you're the, you know, like president of the United States. Yeah. or Elon Musk. 

Adrian Brink: You  have a lot of free times, something like that. but, um, due to that, it's very hard to decide who or who has the right to make upgrades. So who has the right to say, we want to change inflation in Ethereum, for example, um, Tezos ships through the governance mechanism, which means that, if you hold a majority of the coins in the network, you have a much larger say in how the network can evolve in the future.

Right? If you hold 20% of the network, uh, you can have a very large impact on the votes. 

Jonas: Okay. Because it's like a vote. It's like a democracy...

it's not 

Adrian Brink: a democracy 

Jonas: Well, some people have more votes because they have more 

Adrian Brink: It's the more votes you have, the bigger your bank account, the more votes you have.

Jonas: Okay, so that's like a hyper capitalistic concept. 

Adrian Brink: Um, proof of stake blockaines right now, a hyper capitalist, because we effectively didn't have a good civil protection mechanism. So how do I know that you aren't two people? If I only meet you in the internet, while I say you can't duplicate money. So if you have $2, if you want to create a second person, you now each have $1. So you say, well, the $2 is just your voting power, 

Jonas: but there's not only voting, but also the possibility to auto update, the blockchain you see in most blockchains updates have to be done by each node. That means each person that runs a node on the blockchain has to make sure, to always run the latest code. Tezos is called a self amending blockchain because it can basically update itself.

So, so you guys like last year, did the second ever self amended update to the blockchain? So how did that, how does that work? Like, um, first I have like a proposal phase and you have like a voting phase and then you have a rollout phase or something like that.

Adrian Brink: Yes magical. Okay. Blockchains that are auto upgradable. You can almost imagine like large scale botnets. Someone injects some code and then if the code gets accepted by whatever means, then all nodes automatically update to the new code on the network. Which is really cool feature to have, because it means that not everyone has to always manually re-install.

Um, so the way this works in Tezos is, um, someone develops a protocol upgrade, inject, propose it. So the one where the most upvote goes through you can afford many different proposals. Then you go through the second phase. The second phase is the exploration vote. There  people get to vote. And a quorum right now is roughly like 58%.

Jonas: Sorry, what does that mean, quorum? 

Adrian Brink: Uh, like, uh, you need to have enough people participate in the vote. This is by the way, what Brexit should have done. It's not a good idea to have 30% of your population decide what the other seven and the other 70, just turn out to be too lazy to show up. Once you reach quorum, then you also have to reach an 80%, super majority.

So 80% of the people need to vote 'Yes' and less than 20% of the people  need to vote, um,  can vote 'No'. And if that's the case, then the testing phase starts .And the testing phase runs for three weeks. Then the promotion phase starts, um, and the promotion vote is again, another vote where you have the same formal requirements.

And if that one succeeds, then the network will automatically upgrade to the new protocol. Meaning that if you have a protocol that adds new features, you will automate, everyone will automatically get access to the new features. 

Jonas: Or at least that's the theory in practice. Sometimes it looks still a little bit different,

so that's basically how it should be, but it's not really... 

Adrian Brink: so like if you're a Baker, you still require that you manually do things. 

Jonas: Quick update from the cutting room. After the recording of this interview, a brand new protocol update called Carthage has rolled out overnight on Tezos. This time, everything went much smoother and Bakers didn't have to do manual labor to update their nodes.

I asked Adrian if this way of voting and updating the blockchain can prevent Tezos from forking, which is a fancy way of saying splitting. This can happen when influential groups are fighting over the course of the blockchain. 

Adrian Brink: No, I mean, everyone is still free to fork. Uh, this isn't about locking people in, like if, if 20% of the community fundamentally disagree with the choice.

They can always leave and do their own thing. And I think it's a good thing. Otherwise, you get of this very strict vendor lock in which you currently have with AWS or Google, or like you can't leave because you don't own the data, this a super nice about blockchains. So like, if you feel strongly about something, you can decide, fuck it.

I'm off on my own and then try to do it on your own. And I don't think we should prevent it because, um, like, it's very clear to detect, how many people are in favor of something. And if a lot of people are in favor, then you'd go with it. But if not, a lot of people are in favor of, no one is in favor, then you don't go with it.

Like the BSV hard fork in Bitcoin could have just been like five people on Twitter, running Twitter bots, convincing the world that there's actually a large community that wants BSV, maybe in reality, there was no one. We don't know, this is why governance is important. 

Jonas: You know what else is important? That your code doesn't have bugs. Tezos also has a solution for that.

Um, so formal verification, how I understood is like, um, it's about the programming language. So if you do program on a blockchain, um, It's very important that everything works out fine. There's a lot of value tied up in their blockchain and with formal verification that's basically like, um, a mathematical tool that kind of makes it easier for you as a programmer to see if your code is valid and if it's doing what it's supposed to do. 

Adrian Brink: Yes. this is somewhat correct. Historically speaking, um, formal verification has been used relatively little in the realm of software engineering, mostly because the only time it's any really required formal  verification was in the airline industry or the space industry, where if you have one line that's wrong and your rocket blows up, you lose a hundred million dollars.

All of a sudden the economics work that you need from the verification. Smart contracts on the other hand are very different, but they still have the same constraints. Right? 500 lines of code can contain $500 million of value. So all of a sudden it makes a lot of sense. We really, really fucking sure that those 500 lines of code work well.

It's important to note though, you can always make mistakes in your proofs. This is totally possible..

Jonas: What's the point?

Adrian Brink: It just gets harder and harder. Uh, um, just because something is formally verified, it may formaly verify the wrong invariant or someone had made a typo. I'm like this isn't like a Bulletproof thing.

Okay. But it helps a lot. 

Jonas:  how much would you say, like, does it help? 

Adrian Brink: Like out of a scale of a hundred, like 90.

Jonas: What I enjoyed most about our conversation, was that Adrian was speaking very openly with me, even though he's running a business that requires for this technology to succeed, he was very realistic and critical about the space for Adrian is clear that we are still in the early days and still far away from mass adoption.

Adrian Brink: It's like 1995. The internet is just coming out. We don't really understand what to use this for. We're not even at the AOL, Netscape stage. Like, the first applications, like we have no major applications that are actually used by more than like a hundred people a day. Like, when you think about this? Like, 

Jonas: That's crazy.

Adrian Brink: Practically speaking. This is valued at a lot of money right now, but Ethereum maybe has a thousand active daily users, it's nothing. 

Jonas: Yeah. I mean, if that's, I don't know that 

Adrian Brink: If you compare it to the market cap. 

Jonas: Yeah, no, I don't know. They this data, what are you, what are you saying? Where do you get that?  Its just like a guesstimation, I guess?

Adrian Brink: It's a guesstimation, but it's like, um, no one is using it for active payments. Yeah. Some hobbyists are using it for payments. There's some use on Defi. Um, but that's really, it there's like, there's nothing like PayPal that processes hundreds of millions of dollars of value a day. There's nothing like mySpace where millions of people are using it. Like I can very confidently say that Ethereum does not have a million daily active users. And by the way, it only gets worse from here out. Like, Ethereum is probably the most widely used one right now. So like, we were very much before the first point of adoption if i'm honest, 

Jonas: Crazy. That's crazy.

Adrian Brink: Also there's a likelihood that this entire space just disappears in the next five years. Like there's an absolute chance that Bitcoin just goes away in the next years. 

Jonas: Really? 

Adrian Brink: Yeah. This is like, 

Jonas: why, why would that happen? 

Adrian Brink: If we solve no major use cases, it doesn't matter how cool the decentralized system may be, like, if we don't get more than a thousand daily active users for these platforms, these things aren't inherently valuable.

Like, they're valuable because we think that in the future, they can be used by many people, but if we never get to the stage where they are used by many people, the underlying asset are also not valuable. Um, so like if in 10 years, Bitcoin still only has maybe a thousand users. It's not going to be this valuable. Um.

Jonas: Which brings us to the last part. And a subject that a lot of people are grappling with. What is a cryptocurrency ? What are those coins really used for ? And why are they valuable ? These questions go to the very core of what Tezos and frankly, all cryptocurrencies really are. 

Adrian Brink: At some point, you need, you need to have people working on figuring out. What can you actually do with this thing? Yeah. 

Jonas: Yeah. That's a very good question. What can you do with this? What is it actually, I mean, let's go back to the comparison of Bitcoin. It's just given people. Bitcoin was the first, so people know the narrative of Bitcoin, digital gold, basically, store value. And there, there are conflicts, there are different narratives, but let's go with the one is like digital gold.

What would Tezos be compared to that? 

Adrian Brink: I have a hard time believing that. So people believe that Bitcoin is digital gold. However, it's important to understand that if sort of five Chinese people tomorrow decide to print more Bitcoin, they can. Like, if the five mining pools in China go like, yeah, let's just change the underlying protocol to maybe remove the hard cap, they could.

Um, depending on what, what the market goes with. Um, this may now be the canonical Bitcoin. Cause technically the canonical Bitcoin is where the majority of hash rate is spent on. Um, due to that, it's like gold has a finite supply because there's like only so much gold. This sort of goes away, once we reach space.

But like all these assets are fundamentally socially construct, social constructs. I'm sorry, that was somewhat a digression. 

Jonas: It's interesting. 

Adrian Brink: Yeah. Uh, so like Bitcoin is only a store of value because everyone believes that the five mining pools in China won't do this. Um, and hopefully they're right. Maybe it'd be cool.

Um, what these things will be useful for. I don't know. I can see that we form, um, somewhat of digital Commonwealth, where we have like digital nation States almost. Um, because one way you can look at this is, especially the networks with governance. Um, you can look at them like nation States and go, well, they have a way to vote.

So they have some soft, democratic participatory process, a way in which they can make choices about the future. They have access to large amounts of capital, because they can print the underlying money, just like the U.S. Treasury prints money or the Euro prints money. Right. The Swiss Franc does the same thing.

These aren't backed in the real world. This is just magic money. All money is effectively magic. Um, so you can look at them like nation States, digital nation states, maybe that's one use case maybe in the future, people will decide to join the  Tezos nation. Uh, maybe there's a cosmos nation. Maybe there's a Bitcoin nation. Who knows. That's like one possible future I think. Um, 

Jonas: wow. Yeah. 

Adrian Brink: Um, 

Jonas: Do you have other ones? Cause I think like. Let's say people don't know Tezos and ...

Adrian Brink: so, I can give yourself a practical thing. So what everyone talks about, but 

Jonas: or let me ask differently. Like, in Ethereum, one of the debates is, is ether money?

Yes or no. They're like people who say, yes, it is money and you are the ones who say, no, it's not money, money being, meaning. Should it be more like a utility, 

Adrian Brink: like exchange, use for exchange? Unit of account. 

Jonas: Exactly is it? Is it that or not? And I think from my understanding, Tezos was kind of coming more from a Bitcoinish point of view. And for them it's very clear that Tezos is valuable, because it is kind of similar to money.

Adrian Brink: I agree. So the only thing any of these tokens are valuable if, is if they are money. Um, if Ethereum wasn't money, and was just used to pay gas. Ethereum should be valued, like $1 50. Um, the only reason why theory is valuable was just because people assume it could be a future money, um, which is possibly also true for Tezos.

Actually. I think everyone keeps talking about all these fancy use cases. Yeah, we'll be a digit like we'll digitize assets on the blockchain. We'll have utility tokens that  represent shares in underlying companies. Um, all these kinds of kinds of things, are somewhat strange to me because we haven't solved the most basic use case right now, which is private, digital cash.

No one, no one wants to do this because it's regulatory wise a touchy topic, but practically speaking by now, we have the technological means to do this. We have decentralized systems that can act as an underlying ledger to track transactions. We have enough cryptography to construct fully private payment methods on mobile phones.

So really I think the very first use case that all of these platforms should strive to solve, is a PayPal slash wechat  like experience of being able to send someone across the world or next to them, the equivalent of like a five euro bill and it's equivalent. It doesn't matter whether I give you the thing, I could give you a physical five euro bill, or I send you five euros digitally using digital private cash. It's the same thing. Um, in terms of properties, I think for me, this is by far the most interesting use case. Um, but everyone is free to experiment. People can build security tokens and tokenize real world assets and do shady ICOs on Ethereum.

Jonas: but why, why would you think like a normal person, a regular person who has nothing to hide, so to speak, who is not like a mafioso or somebody who is selling drugs or guns would prefer that, um, over, let's say just sending something through PayPal? 

Adrian Brink: Right? Um, It's a very bad idea from nation state perspective even, to leak its financial data to the outside world. And this is really what we, where we currently heading.

For example, I don't understand why Sweden does this, where Sweden wants to phase out cash. And instead, just wants to use visa? Just saying. Yeah, we have nothing to hide from the U.S. government, but you have no idea. The state that something that the U.S. government could be in five, ten, fifty, a hundred years from now, but at that point you've already leaked all your data and now your financial infrastructure is completely transparent to the rest of the world.

I don't think this is a world that anyone wants to live in. 

Jonas: I'm not, I'm not convinced because people share all their data. They don't care. All the...let's. Let's take it away from money. Like even they put their private photos up on Instagram. 

Adrian Brink: Oh, and it will come back to haunt us by the way. To be fair though, if you speak to German people, it's not that they have nothing to hide. They just have in very recent memory, how the Stasi operated in East Germany and no one liked that. Um, so even if you have nothing to hide. It's probably not a good idea to share all your financial or personal data with everyone that asks for it. 

Jonas: But there's also the flip side. I mean, there, there, there are many, um, economists who say, Hey, we have to kind of get rid of cash, because actually it is a big driver and facilitator to crime.

Adrian Brink: Oh, I mean, sure, people would say this, but practically speaking HSBC laundered a billion dollars for the Mexican drug cartels.  The real problem is the existing banking system, facilitating crime, not that cash facilitates crime. 

Jonas: I mean, I'm pro crypto. That's why I do this podcast, obviously. However, I also see like the real possibility of abusing those systems and it will happen and that's actually usually the first use case. I think, who is interested in jumping on something that is more bothersome to use than whatever you use normally. Usually the people who have literally something to hide, they are the first ones 

Adrian Brink: I wouldn't say so. I can actually see Germans for example, due to the fairly recent experience with the Stasi. 

Jonas: Germans  are shady guys, you have to agree on that. 

Adrian Brink: Coming from the Swiss guy.

Jonas: No, okay. 

Adrian Brink: But I think this is the problem. If the user experience is atrocious, which it is right now, Yes. If I want to buy cocaine on the dark dark web, then I'm maybe willing to take the UX trade-offs. But if I want to buy bread, then I'm not willing to take the UX trade-offs, but if there are no UX, trade-offs, I would surely use digital private cash to buy my bread in the local supermarket. Because I think it's a better alternative to using a visa card. 

Jonas: But when you say digital private cash, one of the things is stability. And, um, that we could go into, are you talking about now about a stable coin based on, let's say Tezos, or are you talking about literally like the Tezos coin itself?

Adrian Brink: It's hard to say. I think we need to experiment with this because. I don't know. 

So I think we should have, we should try and see if we can make these underlying tokens, the staking tokens, money and use them in commerce. I think we'll have a very hard time getting adoption for this though. Like, I have a very hard time believing that  the local  supermarket inZuge wants to accept XTZ as a means of exchange and hold this for a long time, because their costbase lies in Swiss Francs, right. So they would maybe take it and immediately convert it. Until a large part of an economy is denominated in some currency, it's sort of inconvenient to use it. Maybe the alternative to this is then we build stable coins on top, maybe something like Maker, or Arthur talked  about something like Checker, algorithmic stable coins, build on top of it.

Um, so that we use the underlying asset and create a stable coin on top, that is relatively stable with reference to some real world currency. That major economies have denominated in. Or maybe the third alternative, which I think Switzerland is in a prime position to do. Is a Swiss central bank starts issuing digital Swiss francs, where they say, look, these are completely fungible with a physical paper bill, whether you send me one with cryptographicly signed, or you hand me a five Swiss Franc bill, same thing.

And they start printing them, maybe on a proof of authority chain, and then they use some other systems. Um, because then you have the guarantees of the Swiss Franc, and we can just use them here in local payments and no one has to be worried that it gets the same thing as if you accepted five Swiss francs,  but all of a sudden you don't have to deal with all the sort of complexity of managing cash. 

Jonas: Okay. Um, we digressed a little bit, but I enjoyed it. I think it's interesting and an important conversation. Well, thank you very much, Adrian. If people would like to reach out to you or  know more about crypto lab, where should they go to?

Adrian Brink: Cryptium.ch or find me on Twitter at Adrian underscore brink.

And if someone wants to give me a birthday present, Adrian Brink is available without the underscore. And I've not yet managed to convince Twitter to give me that handle. 

Jonas: How come?

Adrian Brink: Some other guy with five followers have registered it  like five years ago and this account has now been deleted, but I still have not been able to get my Twitter handle without the underscore. 

Jonas: Jack Dorsey, if you're listening to this, please give Adrian Brink his Twitter handle back and for everybody else, visit unforkable.cc and sign up for the mailing list. I  would really appreciate it.


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